The R&D Imperative: An Executive View

By Patricia Van Arnum - DCAT Editorial Director

March 7, 2018

Biopharmaceutical companies invest approximately $75 billion annually in R&D in the US, more than any other industry in the US. There are more than 7,000 drugs in development, with more than three-quarters defined as first-in-class, meaning drugs with new mechanisms of action. With resources and innovation in full force, what challenges and opportunities do pharmaceutical executives see?

The DCAT Week education program, Executive Insights: Drug Development and Product Innovation, gets into the minds of senior pharmaceutical executives to gain their perspectives on the current and future direction of R&D and product innovation. Among the topics to be examined are evolving R&D business models, collaboration strategies, and the role of precision medicines.

R&D spending: the numbers

Biopharmaceutical companies invest approximately $75 billion annually in research and development (R&D) in the US, more than any other industry in the US, according to information from the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry organization representing the large, innovator, research-based pharmaceutical companies, in its report, 2017 Biopharmaceutical Industry Profile. There are approximately 7,000 medicines in development, with approximately three quarters having the potential to be first-in-class treatments, defined as drugs that have mechanisms of action different from those of existing therapies, according to the report.

R&D spending represents a significant part of total company sales. Total R&D spending accounted for 20.4% of PhRMA companies’ total sales in 2016, according to information from a 2017 PhRMA company member survey. Spending on R&D in 2016 by PhRMA members was $65.54 billion, a 9.9% increase over the prior year.

In terms of spending by phase of development, late-stage development accounted for the largest share: 28% or nearly $18.38 billion in 2016, according to information from PhRMA. Preclinical development accounted for the next largest share of R&D spending at 17.2% or $11.29 billion. The balance of R&D spending in 2016 among PhRMA companies was as follows: Phase I ($6.05 billion or 9.2% of total R&D spending); Phase II ($7.43 billion or 11.3%); approval ($2.4 billion or 3.7%) and Phase IV ($7.47 billion or 11.4%). Approximately one-fifth (19.2%) or $12.56 billion of R&D spending was uncategorized by phase.

Executive perspectives

Given the amount of resources at stake, what are executives considering as they develop and implement their R&D strategies, and how is a dynamic healthcare market, influenced by evolving healthcare policies, impacting product innovation? To gain perspective, the DCAT Week education program, Executive Insights: Drug Development and Product Innovation, will examine those issues. The program, which will be on Tuesday, March 20, will feature executives from both start-ups and established pharmaceutical companies as well as policy experts. 

Evolving R&D business models

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Vivek Ramaswamy
CEO
Roivant Sciences

Raising capital to fund product innovation is crucial for any industry, but it is particularly important for start-up and emerging pharmaceutical companies as they bring new drug candidates and approaches to drug development. One company taking that path is Roivant Sciences, a New York-based healthcare company led by Vivek Ramaswamy, Chief Executive Officer and founder of Roviant Sciences, who will speak at the DCAT Week program. Cited by Forbes as one of the leading entrepreneurs under forty, Ramaswamy is leading a family of companies that include multiple wholly owned or majority-owned biopharmaceutical subsidiaries, each focused on a different disease area. Roivant has 16 drugs in its collective pipeline, and the company has raised more than $2.5 billion in capital to date to fund clinical programs and pursue adjacent business opportunities in healthcare.

Roviant’s most recent company launch was Datavant, a South San Francisco, California-based company focused on employing artificial intelligence to improve the clinical trial process. It was the recipient of one of the single largest private financing for a healthcare company with a $1.1-billion investment from the Softbank Vision Fund, the technology investment arm of SoftBank, a Tokyo-based multinational conglomerate. Part of that investment went into the launch of Roviant’s most recent company, Datavant, a South San Francisco, California-based company focused on employing artificial intelligence to improve the clinical trial process. Datavant is the first company in the Roivant family of companies to operate outside of traditional biopharmaceutical development.

Roivants’ stated focus is to “systematically reduce the time and cost of the drug-development process.” It is seeking to do that with its model of disease-focused entities in the portfolio of its “Vant” companies: Axovant (neurology); Dermavant (dermatology); Enzyvant (rare diseases); Metavant (cardiometabolic disease); Myovant (women’s health and endocrine disease); and Urovant (urology). It uses a four-prong approach focused on drug identification, “Vant” launch, acceleration, and commercialization. Roivant focuses on promising drug candidates from the pipelines of other organizations (drug identification) and then launches new subsidiaries or “Vants” to develop specific drugs in a disease area ("Vant" launch). It then supports the critical functions at each “Vant” to enable drug development (acceleration) and will further support these drugs candidates to bring them to market (commercial launch).

At the DCAT Week program, Executive Insights: Drug Development and Product Innovation, Ramaswamy will address that model and offer perspectives on the all-important issue for R&D: navigating the risk and reward of drug development.

Rising therapeutic areas and precision medicine

Resource allocation in therapeutic areas and drug candidates is critical for pharmaceutical companies. Oncology, the largest therapeutic area by revenue, is a strong focus of R&D programs, and immuno-oncology is one specific area considered as a potential game-changer.

A look at the market numbers and pipelines underscore the importance of this area. Global spending of oncology therapeutics and supportive care drugs was $113 billion in 2016, according to a 2017 report from the IQVIA Research Institute for Human Data Science (formerly QuintilesIMS), which projects spending for oncologics and supportive care worldwide to exceed $147 billion by 2021. That report, Global Oncology Trends 2017: Advances, Complexity and Cost, estimates 631 unique drug candidates in the industry’s late-stage oncology pipeline and points out that over the past decade, advances in personalized medicine and immuno-oncology have fueled a major shift in the treatment of cancer.

So how is immuno-oncology a potential game-changer? Immuno-oncology medicines or cancer immunotherapies enable the patient’s own immune system to fight cancer with different cancer immunotherapies working on the immune system in different ways. A recent analysis by PhRMA estimates that there are 248 immuno-oncology medicines and vaccines in development or awaiting review by the US Food and Drug Administration. Among these are several classes: adoptive cell therapies (including chimeric antigen receptor T-cell [CAR-T] therapies), bispecific antibodies, cytokines, immune checkpoint modulators, oncolytic virus therapies, and vaccines.

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Zhen Su, MD, MBA
 Chief Medical Officer, North America
EMD Serono

The immuno-oncology market is projected to reach approximately $14 billion in 2019 and $34 billion by 2024 in seven developed markets (US, France, Germany, Italy, Spain, UK, and Japan), according to a 2016 analysis by GlobalData, a market research firm. The main drivers of this growth will come from immune checkpoint inhibitors, which the report projects will have sales of approximately $10 billion in 2019 and $24 billion by 2024.

Merck & Co.’s Keytruda (pembrolizumab) and Bristol-Myers’ Squibb’ Opdivio (nivolumab) are two blockbuster immuno-oncology drugs and other companies are advancing their immuno-oncology drugs, including Merck KGaA with Bavencio (avelumab), a human anti-programmed death ligand-1 antibody. The drug is approved for treating Merkel cell carcinoma, a rare form of skin cancer, and urothelial carcinoma (bladder cancer) and is being developed for other cancer types. Merck KGaA is partnered with Pfizer, with whom it formed a strategic alliance in 2014 to co-develop and co-commercialize avelumab.

Immuno-oncology medicines part of an emerging field in pharmaceutical R&D: precision medicines or personalized medicines, which use information about a person’s genes, proteins, and environment to prevent, diagnose, and treat disease. This approach contrasts to a one-size-fits-all approach, in which disease treatment and prevention strategies are developed for the average person with less consideration for the differences between individuals.

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Ioannis Sapountzis, PhD
US Head, Business Development
& Licensing & Specialty Pharma
Boehringer Ingelheim

In 2017, the US Food and Drug Administration (FDA) approved a record number of 19 personalized medicines: 16 new molecular entities and three gene therapies, according to information from the Personalized Medicine Coalition, an industry advocacy group for personalized medicines. The global personalized medicine market is forecast to reach $2.4 trillion in 2022, according to a recent report by Deloitte, 2018 Global Life Sciences Report, which estimates that more than 40% of all compounds and 70% of oncology compounds have the potential to be personalized medicines.

A leading question for the industry is whether precision medicines will become the new normal for drug development. At the DCAT education program, Executive Insights: Drug Development and Product InnovationZhen Su, MD, MBA, Chief Medical  Officer, North America, EMD Serono, the biopharmaceutical business of Merck KGaA in the US and Canada, will share his perspective on the current and future role of precision medicines. A physician executive with more than 20 years of experience, Dr. Su held roles at a number of academic institutions, including Duke University and the University of Florida, where he led early clinical development in immuno-oncology as a faculty member. before joining the biopharmaceutical industry. Within EMD Serono, Dr. Su is responsible for working with the local and global medical, development, and regulatory teams to lead EMD Serono’s medical strategy, clinical presence, and scientific leadership in the US. He previously held leadership roles at Sanofi and GlaxoSmithKline.

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Anne McDonald Pritchett, PhD
Senior Vice President
Pharmaceutical Research and
Manufacturers of America
(PhRMA)

 

Partnering for value

External collaborations are key for product innovation in the pharmaceutical company, so how are these partnerships evolving and what are key trends in collaboration strategies? At the DCAT Week education program, Executive Insights: Drug Development and Product Innovation, lending perspective to that question will be Ioannis Sapountzis, PhD, US Head, Business Development & Licensing & Specialty Pharma, Boehringer Ingelheim. Dr. Sapountzis has more than 15 years of experience in the pharmaceutical industry with specific expertise in drug discovery and business development in oncology. Key issues that will be addressed are evolving collaboration strategies, considerations for early-stage and late-stage assets and new approaches to partnerships.

The nexus between policy and biopharmaceutical innovation

R&D is influenced not only by the business and science of drug development, but also by healthcare policy and other policy concerns that impact biopharmaceutical innovation. With a new Administration and FDA Commissioner, what is on the industry’s radar? Anne McDonald Pritchett, PhD, Senior Vce President, Pharmaceutical Research and Manufacturers of America (PhRMA), will provide insight into key developments and the policy debates, at the DCAT Week education program.

Additional information on the DCAT Week program, Executive Insights: Drug Development and Product Innovation, including how to register, may be found here.